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Facing up to the fiscal storm

George Washington once observed that "We should avoid ungenerously throwing upon posterity the burdens that we ourselves ought to bear." The fiscal facts contained in the Congressional Budget Office's long-term budget outlook, released last month, would leave the normally unflappable Washington appalled.

Just to set the stage: we have an accumulated federal budget debt approaching $15 trillion. That's staggering, but it is small compared to the additional $47 trillion in unfunded liabilities for benefit programs, notably social security and Medicare.

The respected and nonpartisan CBO presents two scenarios. The first, called "extended baseline", assumes that current law taxing and spending will continue. This assumes that Federal deficits (this year: $1.47 trillion, 9.5 percent of Gross Domestic Product) will drop down to around 2 percent of GDP by 2014, then rise steadily to over 4 percent in 2035.

For this to be remotely realistic, the Bush tax rate cuts of 2001 and 2003 will be allowed to expire at the end of this year, not just for "the rich", but for all taxpayers. The Alternative Minimum Tax (AMT) comes roaring back to plague upper middle-income taxpayers. Compensation of physicians providing Medicare services will be slashed 20 percent. The new ObamaCare Independent Payment Advisory Board will get tough on wasting Medicare dollars on sick people who are, in the government's view, well over the hill.

You say the American people will never let their Congress allow those bad things to happen? The CBO agrees, and thus presents an "alternative scenario" that is more politically realistic.

CBO's "alternative scenario" assumes that most of the Bush tax rate cuts will continue, taxpayer resistance will block ever more "soak the rich" schemes, the Medicare doctors and hospitals will get paid quite a bit more, and the outcry over Medicare "death panels" will block those expected savings.

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